What changed in this filing

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Item 1. Financial Statements

2020-11-12 compared with 2020-08-13 · 137 added, 117 removed, 440 unchanged (37% of the section changed)

26 unchanged sentences

Due to affiliates

Income taxes payable

Total current liabilities

25 unchanged sentences

Thirteen Weeks Ended

Twenty-six Weeks Ended

Thirty-nine Weeks Ended

September 28,

Operating revenues:

15 unchanged sentences

Total operating expenses

Income from operations

Income (loss) from operations

Interest income

1 unchanged sentence

Other non-operating income (expense)

Income before income taxes

Income tax expense

Income (loss) before income taxes

Provision for income taxes

Net income (loss)

Earnings per common share:

6 unchanged sentences

Thirteen Weeks Ended

Twenty-six Weeks Ended

Thirty-nine Weeks Ended

September 28,

Net Income (loss)

Other comprehensive income (loss):

Unrealized changes in fair value of interest rate swaps,

net of income taxes of $( 11 ), $( 75 ), $( 146 ) and $( 120 ), respectively

net of income taxes of $ 14 , $( 34 ), $( 132 ) and $( 155 ),

Foreign currency translation adjustments

Total other comprehensive income (loss)

Total comprehensive income

Total comprehensive income (loss)

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(In thousands)

Twenty-six Weeks Ended

Thirty-nine Weeks Ended

September 28,

Cash flows from operating activities:

3 unchanged sentences

Loss (gain) on marketable equity securities

Gain on disposal of property and equipment

Loss (gain) on disposal of property and equipment

Amortization of debt issuance costs

25 unchanged sentences

Repayments under margin account

Dividends paid

Capitalized financing costs

Dividends paid

Purchases of treasury stock

8 unchanged sentences

(In thousands)

Twenty-six Weeks Ended

Thirty-nine Weeks Ended

September 28,

Supplemental cash flow information:

20 unchanged sentences

Balances – June 29, 2019

Comprehensive income

Dividends paid ($ 0.105 per share)

Dividends payable ($ 0.105 per share)

Purchases of treasury stock

Balances – September 28, 2019

Balances – December 31, 2019

7 unchanged sentences

Balances – July 4, 2020

Comprehensive (loss)

Balances – October 3, 2020

See accompanying notes to consolidated financial statements.

11 unchanged sentences

Our fiscal year ends on December 31 and consists of four quarters, each with thirteen weeks.

In March of 2020, the World Health Organization declared the coronavirus outbreak (COVID-19) a pandemic.

The Company remains committed to doing its part to protect its employees, customers, vendors and the general public from the spread of COVID-19.

We will continue to adapt our operations as required to ensure safety while continuing to provide a high level of service to our customers.

To mitigate the impact to our business, we implemented numerous cost reduction efforts beginning in the second quarter including furloughing a portion of the direct labor force, requiring employees to take unpaid time-off, restricting travel, reducing discretionary spending, and various other measures.

Also during the second quarter we began taking advantage of the cash deferral programs available for payment of employer social security taxes and federal and state income taxes under the Coronavirus Aid, Relief, and Economic Security Act (“CARES” Act).

The company makes estimates and assumptions that affect reported amounts and disclosures included in its financial statements and accompanying notes and assesses certain accounting matters that require consideration of forecasted financial information.

The Company's assumptions about future conditions important to these estimates and assumptions are subject to uncertainty, including the impacts of the COVID-19 pandemic.

Although we estimate COVID-19 had the largest impact on our business during the second quarter 2020, we are unable to predict with any certainty the future impact COVID-19 may have on our operational and financial performance.

The Company will continue to monitor these conditions in future periods as new information becomes available, and will update its analyses accordingly.

Recent Accounting Pronouncements

25 unchanged sentences

We transport a wide variety of general commodities, including automotive parts, machinery, building materials, paper, food, consumer goods, furniture, steel and other metals on behalf of customers in various industries.

Truckload services also include our final mile and ground expedited services.

To complement our available capacity, we provide customers freight brokerage services by utilizing third-party transportation providers to move freight.

3 unchanged sentences

Dedicated services are primarily provided in support of automotive and retail customers using van equipment.

Dedicated services also include our final mile and ground expedited services.

Our dedicated services are primarily short-run or round-trip moves within a defined geographic area.

23 unchanged sentences

The Company’s investments in marketable securities consist of equity securities with readily determinable fair values.

The cost of securities sold is based on the specific identification method, and interest and dividends on securities are included in non-operating income (expense).

The cost basis of securities sold is based on the specific identification method, and interest and dividends on securities are included in non-operating income (expense).

Marketable equity securities are carried at fair value, with gains and losses in fair market value included in the determination of net income.

The fair value of marketable equity securities is determined based on quoted market prices in active markets, as described in Note 8.

The following table sets forth market value, cost, and unrealized gains on equity securities (in thousands):

The following table sets forth market value, cost basis, and unrealized gains on equity securities (in thousands):

Unrealized gain (loss)

5 unchanged sentences

Thirteen weeks ended

Twenty-six weeks ended

Thirty-nine weeks ended

September 28,

Realized gain

Sale proceeds

Cost of securities sold

Cost basis of securities sold

Realized gain

Realized gain, net of taxes

During the thirteen-week and twenty-six week periods ended July 4, 2020, our marketable equity securities portfolio experienced a net unrealized pre-tax gain (loss) in market value of approximately $ 875,000 and $( 2,534,000 ), respectively, which was reported in other non-operating income (expense) for the period.

During the thirteen-week and twenty-six week periods ended June 29, 2019, our marketable equity securities portfolio experienced a net unrealized pre-tax gain (loss) in market value of approximately $( 119,000 ) and $ 756,000 , respectively, which was reported in other non-operating income (expense) for the period.

During the thirteen-week and thirty-nine week periods ended October 3, 2020, our marketable equity securities portfolio experienced a net unrealized pre-tax (loss) in market value of approximately $( 497,000 ) and $( 3,031,000 ), respectively, which was reported in other non-operating income (expense) for the period.

During the thirteen-week and thirty-nine week periods ended September 28, 2019, our marketable equity securities portfolio experienced a net unrealized pre-tax gain in market value of approximately $ 21,000 and $ 735,000 , respectively, which was reported in other non-operating income (expense) for the period.

UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

The changes in the carrying amount of goodwill during the twenty-six weeks ended July 4, 2020 are as follows:

The changes in the carrying amount of goodwill during the thirty-nine weeks ended October 3, 2020 are as follows:

Balance as of January 1, 2020

Purchase accounting adjustments

Balance as of July 4, 2020

During the twenty-six weeks ended July 4, 2020, the Company made purchase accounting adjustments to the preliminary purchase price allocation of the Company’s April 22, 2019 acquisition of Michael’s Cartage.

The adjustments resulted in an increase in goodwill of $ 1.6 million, with an offsetting increase in current liabilities of $ 0.1 million and a decrease in other assets of $ 1.5 million.

At July 4, 2020 and December 31, 2019, $ 113.7 million and $ 112.2 million of goodwill was recorded in our transportation segment, respectively.

At both July 4, 2020 and December 31, 2019, $ 56.3 million of goodwill was recorded in our logistics segment.

Balance as of October 3, 2020

During the thirty-nine weeks ended October 3, 2020, the Company made purchase accounting adjustments to the preliminary purchase price allocations of the Company’s April 22, 2019 acquisition of Michael’s Cartage and November 5, 2019 acquisition of Roadrunner Intermodal Services, Inc.

The adjustments resulted in increases of $ 2.3 million in goodwill and $ 1.3 million in intangible assets, as well as decreases of $ 3.3 million in property and equipment, $ 1.5 million in other assets, $ 2.3 million in current liabilities, and $ 0.2 million in deferred tax liabilities.

At October 3, 2020 and December 31, 2019, $ 114.4 million and $ 112.2 million of goodwill was recorded in our transportation segment, respectively.

At both October 3, 2020 and December 31, 2019, $ 56.3 million of goodwill was recorded in our logistics segment.

During the third quarter we performed our annual goodwill impairment test using a quantitative assessment and found there to be no impairment of goodwill.

Accrued Expenses and Other Current Liabilities

4 unchanged sentences

Legal settlements

UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

Debt is comprised of the following (in thousands):

Interest Rates

at July 4, 2020

at October 3, 2020

Outstanding Debt:

15 unchanged sentences

The Credit Agreement includes customary affirmative and negative covenants and events of default, as well as financial covenants requiring minimum fixed charge coverage and leverage ratios, and customary mandatory prepayments provisions.

At July 4, 2020, we were in compliance with all covenants under the facility, and $ 110.0 million was available for borrowing on the revolver .

UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

Debt – continued

At October 3, 2020, we were in compliance with all covenants under the facility, and $ 50.2 million was available for borrowing on the revolver .

Our Equipment Financing consists of a series of promissory notes issued by a wholly owned subsidiary.

3 unchanged sentences

Each of the notes bears interest at a variable rate ranging from LIBOR plus 1.85 % to LIBOR plus 2.25 % .

At July 4, 2020, we were in compliance with all covenants.

At October 3, 2020, we were in compliance with all covenants.

Our Margin Facility is a short-term line of credit secured by our portfolio of marketable securities.

1 unchanged sentence

The amount available under the line of credit is based on a percentage of the market value of the underlying securities.

At July 4, 2020, the maximum available borrowings under the line of credit were $ 4.9 million.

At October 3, 2020, the maximum available borrowings under the line of credit were $ 4.7 million.

The Company is also party to two interest rate swap agreements that qualify for hedge accounting.

The Company executed the swap agreements to fix a portion of the interest rates on its variable rate debt that have a combined notional amount of $ 14.3 million at July 4, 2020.

The Company executed the swap agreements to fix a portion of the interest rates on its variable rate debt that have a combined notional amount of $ 13.7 million at October 3, 2020.

Under the swap agreements, the Company receives interest at the one-month LIBOR rate plus 2.25% and pays a fixed rate.

1 unchanged sentence

The second swap became effective in October 2016 , has a rate of 3.83 % (amortizing notional amount of $ 3.7 million) and expires in May 2022 .

At July 4, 2020, the fair value of the swap agreements was a liability of $ 0.8 million.

At October 3, 2020, the fair value of the swap agreements was a liability of $ 0.7 million.

Since these swap agreements qualify for hedge accounting, the changes in fair value are recorded in other comprehensive income (loss), net of tax.

See Note 8 for additional information pertaining to interest rate swaps.

UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

Fair Value Measurements and Disclosures

9 unchanged sentences

This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

Fair Value Measurements and Disclosures – continued

We have segregated all financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the tables below (in thousands):

Fair Value Measurement

Cash equivalents

1 unchanged sentence

Interest rate swaps

Fair Value Measurement

Cash equivalents

1 unchanged sentence

Interest rate swaps

UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

Fair Value Measurements and Disclosures – continued

The valuation techniques used to measure fair value for the items in the tables above are as follows:

10 unchanged sentences

We categorize these borrowings as Level 2 in the fair value hierarchy.

The carrying value and estimated fair value of these promissory notes at July 4, 2020 is summarized as follows:

The carrying value and estimated fair value of these promissory notes at October 3, 2020 is summarized as follows:

Carrying Value

2 unchanged sentences

We have not elected the fair value option for any of our financial instruments.

UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

On January 1, 2019, we adopted ASU 2016-02, Leases, which required us to recognize a right-of-use asset and a corresponding lease liability on our balance sheet for most leases classified as operating leases under previous guidance.

1 unchanged sentence

We recognize a right-of-use asset and a lease liability on the effective date of a lease agreement.

As of July 4, 2020, our obligations under operating lease arrangements primarily related to the rental of office space, warehouses, freight distribution centers, terminal yards and equipment.

As of October 3, 2020, our obligations under operating lease arrangements primarily related to the rental of office space, warehouses, freight distribution centers, terminal yards and equipment.

Our lease obligations typically do not include options to purchase the leased property, nor do they contain residual value guarantees or material restrictive covenants.

Options to extend or terminate an agreement are included in the lease term when it becomes reasonably certain the option will be exercised.

As of July 4, 2020, we were not reasonably certain of exercising any renewal or termination options, and as such, no adjustments were made to the right-of-use lease assets or corresponding liabilities.

As of October 3, 2020, we were not reasonably certain of exercising any renewal or termination options, and as such, no adjustments were made to the right-of-use lease assets or corresponding liabilities.

We did not separate lease and nonlease components of contracts for purposes of determining the right-of use lease asset and corresponding liability.

4 unchanged sentences

Lease expense for short-term and long-term operating leases is recognized on a straight-line basis over the lease term.

The following table summarizes our lease costs for the thirteen weeks and twenty-six weeks ended July 4, 2020 and related information (in thousands):

Thirteen weeks ended July 4, 2020

UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

Leases – continued

The following table summarizes our lease costs for the thirteen weeks and thirty-nine weeks ended October 3, 2020 and September 28, 2019, and related information (in thousands):

Thirteen weeks ended October 3, 2020

With Affiliates

With Third Parties

Operating lease cost

3 unchanged sentences

Total lease cost

Twenty-six weeks ended July 4, 2020

Thirteen weeks ended September 28, 2019

With Affiliates

With Third Parties

Operating lease cost

3 unchanged sentences

Total lease cost

Thirty-nine weeks ended October 3, 2020

With Affiliates

Operating lease cost

Short-term lease cost

Variable lease cost

Sublease income

Total lease cost

Thirty-nine weeks ended September 28, 2019

With Affiliates

Operating lease cost

Short-term lease cost

Variable lease cost

Sublease income

Total lease cost

UNIVERSAL LOGISTICS HOLDINGS, INC.

1 unchanged sentence

Leases – continued

The following table summarizes other lease related information as of and for the twenty-six week period ended July 4, 2020 (in thousands):

The following table summarizes other lease related information as of and for the thirty-nine week period ended October 3, 2020 and September 28, 2019 (in thousands):

October 3, 2020

With Affiliates

With Third Parties

Other information

Cash paid for amounts included in the measurement of operating leases

Cash paid for amounts included in the measurement of operating

Right-of-use asset change due to lease termination

Right-of-use assets obtained in exchange for new operating lease liabilities

Right-of-use assets obtained in exchange for new operating

lease liabilities

Weighted-average remaining lease term (in years)

Weighted-average discount rate

Future minimum lease payments under these operating leases as of July 4, 2020, are as follows (in thousands):

September 28, 2019

With Affiliates

With Third Parties

Other information

Cash paid for amounts included in the measurement of operating

Right-of-use asset change due to lease termination

Right-of-use assets obtained in exchange for new operating lease

Weighted-average remaining lease term (in years)

Weighted-average discount rate

Future minimum lease payments under operating leases as of October 3, 2020, are as follows (in thousands):

With Affiliates

Total required lease payments

1 unchanged sentence

Present value of lease liabilities

UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

Transactions with Affiliates

(“CenTra”), an affiliate of the Company that is owned by our controlling shareholders, provides administrative support services to Universal in the ordinary course of business, including legal, human resources, tax, and IT infrastructure and related services.

The cost of these services is based on the actual or estimated utilization of the specific service.

Universal also purchases other services from affiliates controlled by CenTra.

Following is a schedule of costs incurred and included in operating expenses for services provided by affiliates for the thirteen weeks and twenty-six weeks ended July 4, 2020 and June 29, 2019, respectively (in thousands):

Following is a schedule of costs incurred and included in operating expenses for services provided by affiliates for the thirteen weeks and thirty-nine weeks ended October 3, 2020 and September 28, 2019, respectively (in thousands):

Thirteen weeks ended

Twenty-six weeks ended

Thirty-nine weeks ended

September 28,

Administrative support services

6 unchanged sentences

In connection with our transportation services, we also pay tolls and other fees for international bridge crossings to certain related entities which are under common control with CenTra.

UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

Transactions with Affiliates - continued

We lease 26 facilities from related parties.

6 unchanged sentences

Other services from affiliates, including contracted transportation services, are delivered to us on a per-transaction basis or pursuant to separate contractual arrangements provided in the ordinary course of business.

At July 4, 2020 and December 31, 2019, amounts due to affiliates were $ 15.8 million and $ 14.8 million, respectively.

At October 3, 2020 and December 31, 2019, amounts due to affiliates were $ 16.1 million and $ 14.8 million, respectively.

In our Consolidated Balance Sheets, we record our insured claims liability and the related recovery from an affiliate insurance provider in insurance and claims, and other receivables.

At July 4, 2020 and December 31, 2019, there were $ 11.8 million and $ 9.9 million, respectively, included in each of these accounts for insured claims.

We purchased wheels and tires from an affiliate during the twenty-six weeks ended July 4, 2020 totaling $ 618,000 .

During the twenty-six weeks ended June 29, 2019, we made purchases of used equipment from an affiliate totaling $ 8,300 , and purchased wheels and tires from an affiliate totaling $ 23,000 during the same period.

At October 3, 2020 and December 31, 2019, there were $ 12.5 million and $ 9.9 million, respectively, included in each of these accounts for insured claims.

We purchased wheels and tires from an affiliate during the thirty-nine weeks ended October 3, 2020 totaling $ 618,000 .

There were no such purchases made during the thirty-nine weeks ended September 28, 2019.

Services provided by Universal to Affiliates

We periodically assist our affiliates by providing selected transportation and logistics services in connection with their specific customer contracts or purchase orders.

Following is a schedule of services provided to affiliates for the thirteen weeks and twenty-six weeks ended July 4, 2020 and June 29, 2019 (in thousands):

Following is a schedule of services provided to affiliates for the thirteen weeks and thirty-nine weeks ended October 3, 2020 and September 28, 2019 (in thousands):

Thirteen weeks ended

Twenty-six weeks ended

Thirty-nine weeks ended

September 28,

Purchased transportation and equipment rent

At July 4, 2020 and December 31, 2019, amounts due from affiliates were $ 0.9 million and $ 1.7 million, respectively

At October 3, 2020 and December 31, 2019, amounts due from affiliates were $ 1.5 million and $ 1.7 million, respectively

UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

Stock Based Compensation

13 unchanged sentences

A grantee’s vesting of restricted stock awards may be accelerated under certain conditions, including retirement.

UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

Stock Based Compensation - continued

The following table summarizes the status of the Company’s non-vested shares and related information for the period indicated:

2 unchanged sentences

Non-vested at January 1, 2020

Balance at June July 4, 2020

In the twenty-six week periods ended July 4, 2020 and June 29, 2019, the total grant date fair value of vested shares recognized as compensation costs was $ 0.2 million and $ 0.1 million, respectively.

As of July 4, 2020, there was approximately $ 1.7 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements.

Balance at June October 3, 2020

In the thirty-nine week periods ended October 3, 2020 and September 28, 2019, the total grant date fair value of vested shares recognized as compensation costs was $ 0.2 million and $ 0.1 million, respectively.

As of October 3, 2020, there was approximately $ 1.7 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements.

That cost is expected to be recognized on a straight-line basis over the remaining vesting period.

3 unchanged sentences

Diluted earnings per common share include dilutive common stock equivalents determined by the treasury stock method.

For each the thirteen weeks and twenty-six weeks ended July 4, 2020, no shares of non-vested restricted stock were included in the denominator for the calculation of diluted earnings per share.

For the thirteen weeks and twenty-six weeks ended June 29, 2019, there were 926 and 904 weighted average non-vested shares of restricted stock, respectively, in the denominator for the calculation of diluted earnings per share

In each of the thirteen weeks and twenty-six weeks ended July 4, 2020, we excluded 85,625 shares of non-vested restricted stock from the calculation of diluted earnings per share because such shares were anti-dilutive.

In each of the thirteen weeks and twenty-six weeks ended June 29, 2019, we excluded 44,500 shares from the calculation of diluted earnings per share because such shares were anti-dilutive.

On April 30, 2020, the Board of Directors temporarily suspended our regular quarterly dividend.

Future dividend policy and the payment of dividends, if any, will be determined by the Board of Directors in light of circumstances then existing, including our earnings, financial condition and other factors deemed relevant by the Board of Directors.

For the thirteen weeks ended October 3, 2020, there were 2,957 weighted average non-vested shares of restricted stock in the denominator for the calculation of diluted earnings per share.

For the thirty-nine weeks ended October 3, 2020, no shares of non-vested restricted stock were included in the denominator for the calculation of diluted earnings per share.

For the thirteen weeks and thirty-nine weeks ended September 28, 2019, there were 943 and 917 weighted average non-vested shares of restricted stock, respectively, in the denominator for the calculation of diluted earnings per share

In the thirteen weeks and thirty-nine weeks ended October 3, 2020, we excluded 20,625 and 85,625 shares of non-vested restricted stock from the calculation of diluted earnings per share because such shares were anti-dilutive.

In each of the thirteen weeks and thirty-nine weeks ended September 28, 2019, we excluded 44,500 shares from the calculation of diluted earnings per share because such shares were anti-dilutive.

UNIVERSAL LOGISTICS HOLDINGS, INC.

6 unchanged sentences

Other non-reportable operating segments are comprised of the Company’s subsidiaries that provide support services to other subsidiaries and to owner-operators, including shop maintenance and equipment leasing.

The following tables summarize information about our reportable segments as of and for the thirteen week and twenty-six week periods ended July 4, 2020 and June 29, 2019 (in thousands):

Thirteen weeks ended July 4, 2020

The following tables summarize information about our reportable segments as of and for the thirteen week and thirty-nine week periods ended October 3, 2020 and September 28, 2019 (in thousands):

Thirteen weeks ended October 3, 2020

Transportation

2 unchanged sentences

Income from operations

Thirteen weeks ended June 29, 2019

Thirteen weeks ended September 28, 2019

Transportation

2 unchanged sentences

Income from operations

Twenty-six weeks ended July 4, 2020

Thirty-nine weeks ended October 3, 2020

Transportation

2 unchanged sentences

Income from operations

Twenty-six weeks ended June 29, 2019

Thirty-nine weeks ended September 28, 2019

Transportation

2 unchanged sentences

Income from operations

UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

Commitments and Contingencies

Our principal commitments relate to long-term real estate leases and payment obligations to equipment vendors.

On June 8, 2020, the Company experienced a cyber-attack affecting certain of the Company’s network systems.

During the attack, the Company experienced limited disruption and rapidly deployed back-up systems or implemented temporary procedures to maintain operations.

The Company is currently investigating the attack, including the scope of transferred or extracted data.

Based on the Company’s best estimate of the liability at this time, the Company has recorded an accrued liability of $ 0.5 million.

While we cannot predict with any certainty the outcome of this matter, management does not believe the ultimate resolution will have a material adverse effect on our business, financial condition, results of operations or cash flows.

The Company is involved in certain other claims and pending litigation arising from the ordinary conduct of business.

2 unchanged sentences

However, if we experience claims that are not covered by our insurance or that exceed our estimated claim reserve, it could increase the volatility of our earnings and have a materially adverse effect on our financial condition, results of operations or cash flows.

At July 4, 2020, approximately 31 % of our employees in the United States, Canada and Colombia, and 86 % of our employees in Mexico were subject to collective bargaining agreements that are renegotiated periodically, less than 10 % of which are subject to contracts that expire in 2020.

COVID-19 Pandemic

In March of 2020, the World Health Organization declared the coronavirus outbreak (COVID-19) a pandemic.

The continued spread of COVID-19 has resulted in governmental authorities enforcing measures to try to contain the virus, such as travel bans and restrictions, quarantines, stay-at-home orders, increased border security and shutdowns.

These on-going measures severely disrupted economic and commercial activity, and caused slowdowns and reduced demand for transportation and manufacturing support services for logistics companies such as ours.

Because we have a significant concentration of customers within the automotive industry, our revenues were significantly affected by the closure of North American automotive and heavy-truck production facilities during the last week of our first fiscal quarter and which persisted throughout the second quarter of 2020.

Although most automotive and heavy-truck operations have resumed production, additional closures and other consumer activity affecting our customers and any future wave of the virus or other similar outbreaks could further adversely affect our business.

A significant portion of our revenue is also provided by a network of agents and owner-operators located throughout the United States and in Ontario, Canada.

As the COVID-19 virus spreads in areas we service, a significant impact to our network due to illness or government restrictions could have a material adverse effect on our ability to service our customers and on our business and results of operations.

In addition, the implementation of measures to protect the health and safety of our employees, customers, vendors and the general public may disrupt our ability to efficiently manage personnel and operations and to recruit and retain driver and non-driver personnel, which could have a material adverse effect on our operating results.

Further, negative financial results, an economic downturn or uncertainty, or a tightening of credit markets caused by COVID-19 or other similar outbreaks could have a material adverse effect on our liquidity, our ability to effectively meet our short- and long-term financial obligations, and our accounting estimates.

To mitigate the impact on our business, we implemented numerous cost reduction efforts including furloughing a large portion of our direct labor force, requiring salaried personnel to take unpaid time-off, restricting travel, reducing discretionary spending, and various other measures.

During the second quarter of 2020, we observed negative macroeconomic indicators resulting from the COVID-19 pandemic, which could have a direct impact on our business.

As a result of these indicators, we qualitatively assessed our goodwill, indefinite lived intangible assets, and other long-lived assets subject to amortization to determine if an impairment loss may have occurred.

We qualitatively assessed whether it was more likely than not that these assets were impaired as of July 4, 2020.

Where considered necessary, we reviewed our previous forecasts and assumptions based on our current projections, which are subject to various risks and uncertainties, including projected revenue, projected operating income, terminal growth rates, and the cost of capital.

Based on our interim impairment assessment as of July 4, 2020, we have determined that our goodwill, indefinite life intangible assets, and our long-lived assets subject to amortization are not impaired.

The Company's assumptions about future conditions important to its assessment of potential impairment, including the impacts of the COVID-19 pandemic, are subject to uncertainty, and the Company will continue to monitor these conditions in future periods as new information becomes available, and will update its analyses accordingly.

At October 3, 2020, approximately 32 % of our employees in the United States, Canada and Colombia, and 87 % of our employees in Mexico were subject to collective bargaining agreements that are renegotiated periodically, none of which are subject to contracts that expire in 2020.

UNIVERSAL LOGISTICS HOLDINGS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

COVID-19 Pandemic - continued

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), was signed into law.

The CARES Act is aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S.

The CARES Act, among other things, includes provisions related to refundable payroll tax credits, deferment of the employer portion of social security payments, net operating loss carryback periods, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property.

We are analyzing the various aspects of the CARES Act to determine the impact specific provisions may have on us.

The Company is currently taking advantage of the cash deferral programs available for payment of employer social security taxes and federal and state income taxes.

Subsequent Events

Our Board of Directors reinstated Universal’s cash dividend policy, and on October 29, 2020 , declared a cash dividend of $ 0.105 per share of common stock.

The dividend is payable to shareholders of record at the close of business on December 7, 2020 and is expected to be paid on January 4, 2021 .

Declaration of future cash dividends is subject to final determination by the Board of Directors each quarter after its review of our financial condition, results of operations, capital requirements, any legal or contractual restrictions on the payment of dividends and other factors the Board of Directors deems relevant.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements